Tesla proved the concept, now the gold rush is on.
Electric vehicles make up about 3% of all vehicles sold in the US They are expected to increase exponentially amid tightening emissions and fuel economy standards, and as the cost of electric vehicles becomes competitive with conventional gas-powered models.
“As far as new manufacturing facilities, (EVs) are where the dollars are being spent,” said David Clayton, executive director of the Clemson University International Center for Automotive Research. Electric vehicles “are performance vehicles and they are luxury vehicles, and people want them. The issue is that the automakers can’t produce them fast enough. ”
There is tremendous potential but also lots of competition, economic risk and uncertainty about which companies – and which US states – will emerge as the winners.
Gov. Brian Kemp and his predecessor, Nathan Deal, have tried to position Georgia to be a hub in the electrified future of the auto industry. That includes billions of dollars in subsidies and incentives offered to companies and footed by taxpayers.
Even if Georgia lands the Hyundai Motor EV plant, as expected, and even with Rivian, and an SK Innovation battery factory in Jackson County, the state’s claim as an EV-building capital will have to be proven by the manufacturers as they scale up and develop vehicles consumers want to buy.
Many other states also have big EV footprints already, including California, Nevada and Texas, which Tesla picked for plants.
Battery charging infrastructure – both on the open road and among utilities to support drivers to plug in at home – also need to be developed in the years ahead at a cost of billions of dollars, some of which is contained in the recent federal bipartisan infrastructure law .
A wobbly economy, inflation, a web of supply chain issues for the auto industry and a looming challenge to source rare Earth minerals to make high-powered EV batteries are among the threats facing automakers —and the states, like Georgia, that are ponying up government funds to support their growth.
Gas-powered models still pay the bills and provide the profits for most automakers, Ketels said, while EVs are an investment that will take years to pay off. But no automaker wants to be left behind.
“It would be silly for me to say all the companies here right now will successfully make that transition,” he said. “It’s a delicate dance.”
But consider just some of the announcements that have come in just the past year:
–Ford launched BlueOval City, a multibillion-dollar EV assembly complex in Tennessee, and a network of battery plants in Tennessee and Kentucky with partner SK Innovation. The Detroit automaker also launched its F-150 Lightning pickup to rave reviews and announced plans to expand production.
–General Motors announced plans to invest $ 7 billion in electric vehicle manufacturing and has launched the GMC Hummer EV and unveiled battery-powered Silverados and Sierras.
–Toyota announced a battery factory in North Carolina and introduced a plug-in crossover developed in tandem with Subaru.
–Volvo, BMW, Mercedes-Benz, Volkswagen and other European giants have committed billions to their battery-powered divisions. Luxury automaker Audi now spends more of its advertising on electrics than for cars powered by conventional engines, according to Bloomberg.
–And not to be outdone, Tesla has opened its “Gigafactory Texas” near Austin. Chief Executive Elon Musk said late last year the plant represents a $ 10 billion-plus long-term investment.
Georgia makes pricey bets on Rivian, Hyundai
Rivian, a company founded a dozen years ago, went public in November with one of the largest IPOs in US history. Its stock price has returned to earth, much like the rest of the stock market, but the company still plans to build 600,000 vehicles per year at its two plants after its Georgia facility is at maximum capacity.
The company makes its flagship R1T truck and R1S SUV and delivery vans for Amazon. The R1T won the coveted Motor Trend Truck of the Year award, a first for an electric.
On Wednesday, Rivian said it will launch its R2 mid-sized SUV with production in Georgia in 2025 with some of the $ 17 billion in cash it has on hand.
But some of the challenges ahead for the sector are confronting Rivian now. The California-based company has struggled to secure computer chips and other components, limiting production at its first plant in Illinois.
Rivian said Wednesday it has built just 5,000 vehicles since it started production, with about half coming in the first quarter of this year. Rivian reaffirmed its scaled-back forecast to build 25,000 vehicles this year and plans to soon start a second shift in Illinois. Earlier in the week, though, it recalled about 500 trucks because of potentially faulty air-bag sensors in front passenger seats.
Tesla, founded in 2003, missed its delivery projections for years and burned capital as it struggled to master mass production. Rivian likely will have to grapple with many of the same challenges, analysts say.
In the first quarter, Rivian reported just $ 95 million in revenue and a $ 1.6 billion loss.
To win Rivian, state and local officials offered a $ 1.5 billion package of grants, tax breaks and other incentives, the largest Georgia ever offered. The incentive package for Hyundai Motor could rival that, something that alarms taxpayer watchdogs.
In Hyundai Motor Group, Georgia is getting a plant that will likely manufacture vehicles for the mainstream consumer. In many ways, Hyundai is a safer bet, analysts say, as one of the world’s largest automakers with 10% market share in the US
Hyundai Motor has deep ties to Georgia. Its Kia subsidiary announced its first US plant in West Point in 2006. Today the factory employs more than 2,700 workers and produces 340,000 combustion-engine vehicles a year.
Its expected EV investment continues a decades-long trend of automotive growth in the South.
“The Southeast as a whole has really established itself in attracting foreign direct investment,” Clemson’s said Clayton. “The new market entrants are really putting the region on the map for those companies as well … I think there’s still more to come.”
Clayton said he expects the new auto plants will draw more interest from automotive suppliers that make everything from seats to windshield wipers to look at the Southeast.
“It really is a global competition,” he said. “Yes, (automakers) may compare North Carolina and South Carolina and Georgia. But they’re also making decisions with respect to Mexico and Vietnam or China, ”serving export markets.
One of the factors that will make or break these investments will be access to labor. Georgia’s unemployment rate hit a historically low 3.1% in March.
“The labor markets are tight and are likely to stay that way in the near term,” said Roger Tutterow, an economics professor at Kennesaw State University. “If they’re willing to pay up in terms of compensation, they’ll be able to fill them.”
During the Great Recession, Georgia mourned the loss of its Atlanta-area GM and Ford plants. Less than 15 years later, Georgia is on the cusp of two new factories.
“Now we have got them migrating back in,” Tutterow said.
A note of disclosure
Cox Enterprises, owner of The Atlanta Journal-Constitution, owns about a 4% stake in Rivian and supplies services to the company. Sandy Schwartz, a Cox executive who oversees the AJC, is on Rivian’s board of directors and holds stock personally. He doesn’t take part in the AJC’s coverage of Rivian.